Measuring the 2011 financial winners and losers in MLB

How well did MLB teams spend their money this season? Here’s a look at how well or how poorly teams did with their payrolls this season in an attempt to translate dollars into wins — and why the Houston Astros, even with a low payroll, overpaid their players this season.

With the 2011 season completed, it’s time to look at how well MLB did in translating payroll to win. Despite what many fans think, there’s not necessarily a correlation between payroll and winning: as any Chicago Cubs fans knows, spending money doesn’t guarantee a winning percentage. The more important measure is how efficiently a team managed their resources: coaxing the most wins for the least amount of money.

No surprise that Tampa Bay would top this list; the team is notable for combining a low payroll with a winning record, thanks to a shrewd front office, a posse of young stars (Evan Longoria, David Price) and the managerial skill of Joe Maddon. And no surprise that both Arizona and Milwaukee would rank in the top 10: both teams are built around youth and inexpensive pitching. It’s also no surprise that the Yankees and the Phillies would be in the top five: both teams invested heavily in payroll and compiled the most wins in baseball this season.

As a measure of success and failure, though, this ranking is less useful than you’d think. If you think about it, the ranking above is also a measure of market size, with smaller-market teams spending less than big-market teams. Here’s your tautology for the day: Small-market teams spend less because they have less to spend. Large-market teams with robust revenue resources are always going to spend more because they can — or, more importantly, because their fans expect them to spend big bucks on players. We saw that in Minnesota, where the Twins spent a lot of money on Tsuyoshi Nishioka; in recent Metrodome days the Twins front office simply didn’t the resources to sign a big-buck free agent. The positioning for next season already started: witness the large number of Chicago Cubs fans assuming Tom Ricketts will spend huge money to sign both Prince Fielder and Albert Pujols.

So what makes for a more useful measure? The late Doug Pappas put together a formula to measure Marginal Dollars per Marginal Win. The assumption is that a terrible team in baseball, made up entirely of minimum-wage players, would still manage to win a third of their games, so the true measure of success is how efficiently a team spent to procure wins past that minimum. In short, a successful team would spend the fewest marginal dollars to procure the most marginal wins; conversely, an unsuccessful team would overspend to procure a relatively few number of wins. They wasted their money.

We’ve applied this formula to this year’s teams, using the same payroll numbers from USA Today. In the following table, we have winning percentages, MW (marginal wins: winning percentage * .3), MP (marginal payroll; the amount a team spends beyond the MLB minimum of $414,000 per player on a 25-man roster), and CPMW (cost per marginal win: marginal payroll divided by marginal wins). In this ranking, the poorest-performing teams are at the top; the better-performing teams are at the bottom.

Team

Payroll

Win %

MW

MP

CPMW

1

Houston Astros

70,694,000

0.346

7.5

60,344,000

8,097,692

2

Minnesota Twins

112,737,000

0.389

14.4

102,387,000

7,101,332

3

Chicago Cubs

125,047,329

0.438

22.4

114,697,329

5,130,494

4

Seattle Mariners

86,524,600

0.414

18.5

76,174,600

4,124,681

5

New York Yankees

202,689,028

0.599

48.4

192,339,028

3,970,829

6

Chicago White Sox

127,789,000

0.488

30.5

117,439,000

3,856,022

7

New York Mets

118,847,309

0.475

28.4

108,497,309

3,827,066

8

Baltimore Orioles

85,394,938

0.426

20.4

75,044,938

3,676,511

9

Boston Red Sox

161,762,475

0.556

41.5

151,412,475

3,650,957

10

Los Angeles Angels

138,543,166

0.531

37.4

128,193,166

3,425,610

11

Colorado Rockies

88,148,071

0.451

24.5

77,798,071

3,180,364

12

Philadelphia Phillies

172,976,379

0.630

53.5

162,626,379

3,042,020

13

San Francisco Giants

118,198,333

0.531

37.4

107,848,333

2,881,950

14

Los Angeles Dodgers

104,188,999

0.509

33.9

93,838,999

2,771,546

15

St. Louis Cardinals

105,433,572

0.556

41.5

95,083,572

2,292,717

16

Oakland Athletics

66,536,500

0.457

25.4

56,186,500

2,209,110

17

Cincinnati Reds

75,947,134

0.488

30.5

65,597,134

2,153,833

18

Detroit Tigers

105,700,231

0.586

46.3

95,350,231

2,057,978

19

Florida Marlins

56,944,000

0.444

23.3

46,594,000

1,997,342

20

Atlanta Braves

87,002,692

0.549

40.3

76,652,692

1,900,260

21

Texas Rangers

92,299,264

0.593

47.5

81,949,264

1,726,483

22

Washington Nationals

63,856,928

0.497

31.9

53,506,928

1,676,597

23

Toronto Blue Jays

62,567,800

0.500

32.4

52,217,800

1,611,660

24

San Diego Padres

45,869,140

0.438

22.4

35,519,140

1,588,797

25

Milwaukee Brewers

85,497,333

0.593

47.5

75,147,333

1,583,182

26

Pittsburgh Pirates

45,047,000

0.444

23.3

34,697,000

1,487,354

27

Cleveland Indians

49,190,566

0.494

31.4

38,840,566

1,235,859

28

Kansas City Royals

36,126,000

0.438

22.4

25,776,000

1,152,979

29

Arizona Diamondbacks

53,639,833

0.580

45.4

43,289,833

954,361

30

Tampa Bay Rays

41,053,571

0.562

42.4

30,703,571

723,390

There’s a general correlation between the rankings in each measure, but we’d argue that results are considerably more refined in the second, particularly when it comes to futile spending. No surprise Tampa Bay, Arizona and Milwaukee would be near the bottom: they’re low-payroll teams who were winners this season. And although Pittsburgh, Cleveland and Kansas City weren’t above .500 this season, you could argue they spent their money well, not overpaying for wins while still building a solid platform for the future.

It also places the Philadelphia Phillies in an interesting position: still in the top half of MLB teams in buying wins, but not excessively so, and certainly within what you’d expect for a large-market team. The Phillies raised a lot of eyebrows when they invested even more in payroll this season after signing Cliff Lee to a contract, but the increased payroll seems to have paid off with a season-long set of sellouts at Citizens Bank Park and a playoff appearance.

More telling, however: this list pretty clearly shows the teams that ended up spending inefficiently. Houston spent a whole lot of money to gain just seven wins above the baseline, while Minnesota suffered through a miserable season redeemed by three-million fans going through the turnstiles of Target Field. It also shows that a low payroll doesn’t equal success: Houston and Seattle both trimmed payroll and still managed to spend a lot per marginal win. Baltimore, too, went cheap and still paid a lot per marginal win. So while big spending doesn’t automatically success, lower payroll don’t automatically mean success, either.

Obviously there are limits to this kind of analysis. Payroll is a crude measure; just as important, we’d argue, is revenue, but MLB teams zealously guard revenue data, so we can’t throw it into the equation. In general, a large-market team will generate more revenue than a small-market team — duh! — but there are many shades between a New York Yankees and a Kansas City Royals when it comes to revenues, and there’s some fluidity in where a team ranks in revenue production among its peers (i.e., Minnesota going up the last two years and the Dodgers going down the last two years). Of course, that’s a whole other can of worms.

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